What You Need To Know Before You Refinance Your Car Loan
If you are having trouble making your monthly car payments, you may want to consider refinancing your car loan. Before you begin the process, there are some things you need to know:
What Does a Refinanced Car Loan Consist Of?
When you refinance your car loan, you are essentially getting a new loan with a different interest rate. The goal is to lower your payments by getting a lower interest rate. You then get the loan for the remainder of your original loan amount reflecting the lower interest rate. You can also get new terms that decrease your payments if you prefer. The terms can be shorter also to help you pay off your loan more quickly.
Why Should You Refinance Your Car Loan?
There are several instances in which you may want to refinance your car loan. If your original loan has a higher interest rate, you may qualify for a lower rate, especially if your credit has improved since you obtained your original loan. A few points lowered from your original interest rate can help significantly decrease the overall cost of your vehicle.
You may also want to refinance your car loan if your payments are too high for you to manage. Different things can happen that may make your current loan terms unaffordable. A decrease in salary or the addition of other debts can cause this situation. Refinancing your car loan can help your financial situation more manageable while still allowing you to keep your vehicle.
What Do You Need to Refinance Your Car Loan?
A lender will need certain documents to refinance your loan. As you apply, you will need to provide proof of your income, your identification, proof of your residence, and the information on your vehicle such as the bill of sale, make and model of the car, the VIN number, and the like.
Does a Car Loan Refinance Impact Your Credit?
Any time a lender checks your credit to determine if you qualify for a refinance, you may see a small dip in your credit score. Fortunately, the impact is small and will be temporary. Keep in mind that each time your credit is checked, your credit score will decrease. It is best to not shop around too much for a car loan refinance. Too many credit checks from different lenders can eventually impact your score too much. You should know which lender you want to work with before your credit is checked to avoid this issue.
To learn more, contact an auto loan refinance professional near you.